Recently, the cryptocurrency world has come alive after a prolonged period of calm, as the American regulator has initiated a systematic crackdown on centralized cryptocurrency exchanges (CEX). New regulatory measures have been taken for several reasons, and they could have significant consequences for the industry.

Contents:

• SEC investigates Binance
• SEC files lawsuit against Coinbase
• SEC sues Binance.US
• Binance responds to recent events
• Impact of lawsuits on the cryptocurrency industry
• Authorities impose restrictions on cryptocurrency usage
• Conclusion

SEC investigates Binance

On Monday, June 5th, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Changpeng Zhao, the founder of the cryptocurrency exchange Binance, and the platform itself. In total, Binance is accused of 13 charges, which we will examine in more detail.

Binance has faced serious allegations, with the top accusation being "cynical disregard" for US legislation. This disregard has led to the unjust enrichment of the exchange's leadership by billions of dollars, while putting investors at risk. Additionally, Binance encouraged its clients to engage in transactions on its platforms, including both Binance and Binance.US.

Platforms offered clearing, brokerage, and exchange services without proper registration with the SEC. Additionally, Binance unlawfully sold securities linked to cryptocurrency and conducted earning programs such as "BNB Vault," "Simple Earn," and staking. However, participants in these programs were not provided with adequate risk disclosures associated with such instruments.

The SEC regulator has raised questions regarding the influence exerted by BAM Trading and BAM Management on Binance.US. According to the allegations, Changpeng Zhao is accused of creating a complex scheme to circumvent US laws, which, according to claims, was conceived by him as early as 2018.

The SEC claims that the founder of Binance was aware of the importance of investment control and supervision. The lawsuit highlights a statement from Zhao in 2019, where he emphasizes that trustworthiness is a key asset for any exchange. According to the SEC, BAM Trading and BAM Management intentionally represented that there was control and supervision over Binance.US to prevent speculative trading. However, the regulator has doubts about the reality of this "control and supervision."

Moreover, platforms are facing accusations of intentionally concealing information, which leads to damage to investment security and systematic violation of the law. They are accused of manipulating "critical important information," which poses a threat to clients.

It looks like only Zhao and his platform were affected, but that's not entirely true. This lawsuit specifies which tokens were sold as investment contracts, and therefore considered securities. There were a total of 12 such tokens: BNB, BUSD, SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI.

SEC files lawsuit against Coinbase

Recently, the Securities and Exchange Commission (SEC) filed a new lawsuit against the leading cryptocurrency exchange Coinbase. This time, the company found itself under close scrutiny by the regulator due to several deficiencies identified by them.

Первый из этих недостатков заключается в том, что Coinbase выполняла функции как клиринговой компании, так и биржи, но не получила регистрацию в SEC. Аналогичные претензии ранее возникали и в отношении Binance.

The second drawback is associated with the failure to meet the disclosure requirements of Congress and the SEC (Securities and Exchange Commission). According to the regulator, such improper disclosure of information poses a threat to national securities markets and investors.

Coinbase also provided brokerage services through Coinbase Wallet and Coinbase Prime in addition to its exchange. In these cases, users did not undergo registration.

On the exchange, cryptocurrency trading was also conducted as securities. As a result, both Coinbase itself and its parent company, CGI, were brought under accusation.

The exchange is also accused of making business decisions for many years, knowing that its main source of income would be commissions from assets that exhibit characteristics of securities. Therefore, its activities were subject to regulation.

In addition, the United States Securities and Exchange Commission (SEC) expressed concerns regarding Coinbase's staking program. Under this program, users could stake five different cryptocurrencies, each of which is considered an investment contract and, therefore, a security. The issue lies in the fact that the staking program was not registered with the SEC, which could potentially harm the interests of investors.

In addition, certain cryptocurrencies have been identified as securities in the lawsuit against Coinbase. The SEC has named 13 such cryptocurrencies.

SEC sues Binance.US

On the same day Coinbase faced a lawsuit, the SEC issued a request to freeze the assets of Binance's US division. The main reason for these actions was the need to protect the funds of platform users, including preventing potential cases of fraud.

The financial regulator insists that banks freeze the assets of Binance.US and return the funds to American customers of the platform, including cryptocurrencies. Simultaneously, employees of the exchange must cooperate by providing transaction information and not concealing it.

Additionally, Binance.US announced on June 7th, that after careful consideration, the company's management has decided to delist several trading pairs to streamline their trading offerings. The total number of delisted pairs is 40, some of which include:

• 1INCH/USDT,
• AAVE/USDT,
• DOT/BTC,
• ZEC/USDT and others.

Binance responds to recent events

The CEO of the cryptocurrency exchange Binance has called on everyone to remain calm and not succumb to panic in response to the allegations made by the financial regulator. He emphasized that the entire team of the exchange is working towards ensuring the stability of service operations.

Binance has also released a detailed statement on its blog, commenting on the SEC's decision. In the statement, Binance expresses extreme disappointment with the actions of the Commission and denies the allegations made against it. The exchange emphasizes that all user assets on Binance and its affiliated platforms are secure. The company also stated its readiness to vigorously defend itself against any accusations.

Representatives of the trading platform claim that the actions of the Securities and Exchange Commission (SEC) are more aimed at establishing their jurisdiction over a global player in the market rather than genuinely protecting clients. Meanwhile, Binance states that the SEC's actions "undermine America's leading role as a global center for financial innovation."

Lawsuits filed against Coinbase and Binance have had a significant impact on the cryptocurrency markets and have resulted in a number of other consequences.

Impact of lawsuits on the cryptocurrency industry

The reaction of crypto investors to the actions of the SEC was expected, as many of them started selling their cryptocurrencies. On June 5th, ADA prices decreased by 6.77%, SOL by 8.99%, and MATIC by 6.39%. Even Bitcoin, which was not mentioned in the lawsuits, lost over 5% of its market value.

On June 6th, Coinbase shares also came under pressure. On that day, their price dropped by 12.09%. However, it is worth noting that they had previously declined by as much as 21% at times.

On June 7th, the brokerage firm Robinhood announced that it may exclude Cardano, Solana, and Polygon from its trading platform. This is due to the mention of these cryptocurrencies in lawsuits filed by the SEC, where they are being considered as securities.

The potential worsening of the regulatory pressure on Binance has had a mixed impact on the cryptocurrency industry. Coinbase has also faced allegations from the SEC, but the list of accusations and their nature are not as strict as in the case of Binance. Other major market participants that already comply with the requirements of the US financial regulator could potentially benefit from the pressure on Binance, as the latter has a significant share of active clients.

Authorities impose restrictions on cryptocurrency usage

A notable statement by Chairman Gary Gensler was his assertion in one of his recent public speeches that "the United States no longer needs cryptocurrencies as the country already has digital currency." He further added that the dollar, euro, and yen are now "digital." Thus, Gensler effectively expressed opposition to the competition cryptocurrencies pose to fiat currencies.

US Treasury Secretary Janet Yellen has expressed her position more clearly, emphasizing the need for stronger control and regulation of the cryptocurrency industry. She has supported the actions of the Securities and Exchange Commission (SEC), considering them appropriate, but has avoided making direct comments regarding the lawsuit against Binance.

Thus, it can be concluded that the role of government control and the level of intervention by authorities in the field of cryptocurrencies have significantly increased through various agencies, commissions, and administrative barriers. However, it has long been understood by economists and early advocates of encryption and cryptocurrencies that the concept of cryptocurrencies differs from traditional financial solutions and contradicts the state monopoly on issuing currency. These ideas were expressed many years ago.

Conclusion

In 2023, American regulators have significantly intensified their supervision over centralized cryptocurrency exchanges. In early June, the SEC filed lawsuits, and this is far from the first instance of such activity. As early as February, the Commission initiated an investigation into Kraken exchange's compliance with the law.

In late March, the Commodity Futures Trading Commission (CFTC), another regulatory body, filed charges against Binance for violating laws governing commodity exchanges (CEA). It is alleged that the platform's management intentionally violated US legislation.

The second circumstance involves filing lawsuits against Binance and Coinbase, which draws attention to the fact that the management was aware of illegal activities. This will undoubtedly be considered in court as a factor aggravating the defendants' position.

The third important point to note is the recognition of certain cryptocurrencies as securities. Many of these cryptocurrencies utilize the Proof-of-Stake (PoS) consensus mechanism. However, not all PoS coins were included in this list. For instance, in both documents, ADA and SOL are listed first, but ETH and AVAX are absent from this list.